US trade deficit shrinks less than expected

The US trade deficit narrowed in June, pulling back from its highest level in 20 months, according to the Bureau of Economic Analysis, but still came in above market forecasts.

The goods and services trade balance was -$73.1bn, $1.9bn less than the revised -$75.0bn in May which was the highest deficit recorded since October 2022, the BEA reported on Tuesday.

However, this was still slightly higher than the -$72.4bn consensus estimate.

Exports rose 1.5% or $3.9bn to $265.9bn, driven mainly by increased exports of aircraft and oil and gas, while imports rose 0.6% or $2.0bn to $339.0bn, with large increases in imports of pharmaceuticals.

The largest surpluses were recorded with the Netherlands ($4.8bn), South and Central America ($3.6bn) and Hong Kong ($2.1bn), while the largest deficits were recorded with China ($22.3b), the EU ($18.0bn) and Mexico ($13.7bn).

Economist Matthew Martin from Oxford Economics said the outlook for trade remains mostly unchanged following Tuesday's data, with imports expected to continue outpacing exports over the remainder of 2024.

"Domestic demand remains robust, and lean inventory levels means businesses are bulking up to meet demand. Exports have struggled due to weak global demand and the weight of a strong dollar. However, the global backdrop is brightening slightly, and the greenback has been relatively stable this year," Martin said.